The call comes out of nowhere. A friendly voice. A name you don't recognize. They say they've been following your company for a while, that they're impressed with what you've built, that they'd love to have a casual conversation — no pressure, just a chat.
That call is not casual. It is not random. And it is absolutely not about you.
It's the opening move in a choreographed process that private equity firms have spent decades perfecting. They run it on hundreds of companies simultaneously. You've never sold a business before. They've bought hundreds. That asymmetry is the whole game — and understanding it is the only way to change the outcome.
They're Not Interested in Your Company. They're Interested in a Thesis.
Every PE firm operates with a defined investment thesis — a specific hypothesis about an industry, a customer base, a margin structure, a growth vector. They're not browsing. They're hunting for companies that fit a predetermined mold.
When they call you, it means your company matches a pattern they've already decided to buy into. That sounds flattering. It isn't. It means they have a number in mind before the first conversation — and that number has been engineered to work for them, not for you.
The thesis also explains why they move fast and why their initial framing feels so aligned with yours. They've done this pitch dozens of times. They know exactly which words make an owner feel understood.
The LOI Is Not an Offer. It's a Trap Door.
Here's what most owners don't know: the Letter of Intent is designed to feel like the finish line. It has a number on it — often a real, exciting number. It creates urgency. It asks for exclusivity. And once you sign it, the leverage shifts entirely to the buyer.
Exclusivity clauses in LOIs typically run 60 to 90 days. During that window, the PE firm runs due diligence. What they find — or claim to find — becomes the basis for price chips. A customer concentration issue. A key-man dependency. An EBITDA add-back they won't accept. Each one shaves value.
The average retrade — the gap between the LOI price and the final close price — ranges from 8% to 15% on deals where the seller had no advisor running a competitive process. Some are worse. The owners who got there alone almost never talk about it publicly.
The "Platform vs. Add-On" Gap Will Cost You Millions If You Don't Understand It
When a PE firm buys its first company in a sector, that's a platform acquisition. They'll pay a premium — sometimes a significant one — because that company becomes the foundation for a roll-up strategy.
When they buy the second, third, and fourth companies to bolt on to that platform, those are add-ons. Add-ons trade at a discount. Often a steep one. Three to four turns of EBITDA lower is not unusual.
Now here's the uncomfortable part: if a PE firm that already owns a competitor calls you, you are by definition an add-on target. They may not say that. They'll describe synergies and growth capital and the exciting things they're building together. But their model already has your multiple. And it's lower than you think you deserve.
The only antidote is a real competitive process — one that surfaces other buyers, including strategic acquirers who might pay platform-level multiples because you're the asset that lets them enter your market.
They're Measuring Chemistry. You Should Be Measuring Leverage.
PE courtship is deliberately relational. The principals are often charming, smart, and genuinely interesting people. They'll invite you to their portfolio company conferences. They'll introduce you to operators who've done deals with them and are happy to talk. They'll make you feel like a partner, not a target.
This is not cynical — some of them really mean it. But the relationship-building serves a strategic function: it creates psychological switching costs. Once you like them, once you've spent eight dinners together, once you've started imagining the future they're describing — saying no feels like a personal rejection, not a business decision.
Your job is to stay warm and genuinely engaged while simultaneously running a process that creates real competition. The moment you stop returning other buyers' calls because you've fallen for one firm's story, your price drops. Not metaphorically. Literally.
The Management Rollover Conversation Happens at the Worst Possible Time
At some point — usually late in the process, often after exclusivity — they'll ask how much equity you want to roll into the new deal structure. This is presented as an opportunity. "We want you to have skin in the game. We want you to benefit from the upside we're going to create together."
Rolling equity is sometimes genuinely valuable. A well-structured rollover into a platform with real growth ahead can produce a meaningful second bite of the apple. But the timing of this conversation is not accidental.
You're deep in the process. You've told your spouse. You've mentally retired. The last thing you want to do is renegotiate the structure from scratch. So you accept terms that a fresh, unattached negotiator would never accept — the percentage of rollover, the valuation at which it's priced, the liquidation preferences that govern when you actually see that second bite.
Get an M&A attorney and an advisor who specializes in this structure before the conversation starts. Not during it.
Your EBITDA Number Is Not Their EBITDA Number
Private equity firms use their own adjusted EBITDA calculation to set price. They add back what they choose to add back and challenge what they choose to challenge. Their QofE — Quality of Earnings — provider works for them, not for you.
Owner compensation above market rate is a classic target. So is discretionary spending. So is any revenue they deem non-recurring. The gap between your EBITDA and their adjusted EBITDA can easily represent $500,000 to $1.5 million in earnings — and at a 6x multiple, that's $3M to $9M in enterprise value quietly evaporating.
The defense is simple but requires preparation: run your own Quality of Earnings before going to market. Know your number before they define it for you. Sellers who arrive with a clean, pre-negotiated EBITDA package close faster, chip less, and walk away with more.
The Best Deals Get Done When the Seller Doesn't Need to Sell
PE firms are expert at reading desperation. A founder who needs liquidity for a family reason, a health situation, or a partnership dispute will telegraph it — in their urgency, in their willingness to accept early terms, in how quickly they stop pushing back.
The highest valuations in sell-side M&A consistently come from owners who were genuinely prepared to walk away. Not as a tactic — as a reality. When you have alternatives, when your business continues to perform, when you're not emotionally or financially cornered, the negotiation changes completely.
This is why the five years before a sale matter more than the five months of the process itself. The preparation window is when you build the leverage that the deal table will reward.
Bottom Line
Private equity firms are not adversaries. Some of them are exceptional partners who build real value and treat sellers with genuine respect. But they are professional buyers operating a refined system — and respect in that system is earned by sellers who show up equally prepared.
You built something real. You deserve a process that reflects its real value — not a number engineered inside someone else's model before you picked up the phone.
If a PE firm has already called — or if you're thinking about what a sale process should look like before they do — the time to get oriented is now, not after the LOI lands on your desk.
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